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Building a “Manufacturing Value Network” in the Philippines

Last March 13, 2015, I attended “A Gathering of Industry Champions” organized by the Board of Investments. Led by DTI Secretary Gregory Domingo, Undersecretary and BOI Managing Head Adrian Cristobal, BOI Governor Lucita Reyes, Asec. Fita Aldaba, Director Corieh Dichosa, it’s the third annual gathering of  industry associations who are currently implementing their industry roadmaps in coordination with the BOI and wide range of government agencies. Private sector and BOI industry champions were all present, with a number of sector leaders providing testimonies on their roadmap implementation, successes and challenges.

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This reminded of what Dr. Ricardo Hausmann called, “value networks”. Hausmann points out that the secret to economic growth is diversity and complexity, and they can be attained by networking a variety of activities, instead of focusing on a few existing, tried and tested things.

Looking back at the past decade, we had a few very strong sub-sectors, like electronics and semi-conductors, but it had little connectivity to the other manufacturing sub-sectors. We had a fragmented collection of sub-sectors without the benefit of networks that would have provided a wide range of suppliers, customers, service providers as well as generate new opportunities, new products and even spur new sub-sectors.

Individual companies craft their own strategies. But when they participate in creating an industry or sectoral roadmap, collaborations are formed, as they find new customers, suppliers and even partners. A value network extends beyond sub-sectors, and enabling firms to network faster with those in other sub-sectors. It’s difficult for individual firms to engage an entire sub-sector, but through value networks, facilitated by industry and umbrella associations and government agencies, more firms are engaged, faster.

Emerging Manufacturing Value Networks

photo2 One example I heard in the forum is how the BOI connected the construction supply producers to the mass housing sub-sector. While it’s certainly possible for individual firms to connect to the builders of mass housing, networking at a sub-sector level, with a government agency facilitating, brings the collaboration to whole new level. Another example is how auto and metal part makers in the Philippines are “jumping” to aircraft parts and other new applications, enabled by DOST MIRDC new investment on state of the art metal working laboratories.

It is at the intersections and connections where great value is created. Think about how auto-parts, fiberglass, electronics and batteries yield a new industry called e-trike. How the new naphtha cracker drives the expansion of plastic resins, which enables world-class quality packaging for our largest sub-sector the food manufacturing industry.

Nodes are getting connected, no longer randomly, but in a more coordinated fashion, making it faster than ever. As more firms get connected, the network broadens, encouraging more entrants instead of hindering them. There is no single firm, nor industry association, nor government agency has a broad enough perspective to guide our entire industry. Only through extensive collaboration and networking can we achieve long term, inclusive growth.

In our next post, well talk about these nodes and connections, in what is known as the Product Space of the Philippines.

Philippines Product Space 2012

Philippines Product Space 2012

 

 

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